Japanese investors are repatriating funds from around the world at an
accelerating pace, dashing hopes that stimulus from the Bank of Japan will
flood global asset markets with newly-printed money.

Fresh data from Japan's finance ministry showed that large banks, insurers, and pension funds sold a net $8.7bn in foreign bonds and stocks last week, bringing the total to $35bn over the last six weeks.

Analysts had expected the big institutions to start chasing global assets in a revival of the "yen carry trade" after dramatic policy shift by the Bank of Japan's new team under Haruhiko Kuroda, but the fondly-awaited "wall of money" has yet to materialise.

Instead, Tokyo's behemoth funds are cashing windfall gains abroad generated by the 20pc slide in the yen since July, rotating the profits into assets at home.

"We have looked at the flow data and contrary to high hopes our clients have not bought a single Italian or Spanish bond," said an analyst at one Japanese bank.

The repatriation effect has major implications for global bonds and stocks. Japan is still the world's biggest creditor with an overseas portfolio of $3.75 trillion, and its actions can at times shape the financial universe.

Investors have been counting on the Kuroda stimulus to flush the world with money, with some estimates of pent-up funds reaching into trillions of dollars.

Marc Ostwald from Monument Securities said profit-taking on foreign assets is unlikely to last long. "Japanese investors can't stay at home because they will be killed as income falters on their holdings of JGBs (government bonds). They will have to hunt down yield abroad," he said.

"This could take a couple more months because people are very suspicious of Kuroda' policies. Global markets have pre-empted the effects of Japan's stimulus so this could set up a short-run disappointment."

Ian Stannard from Morgan Stanley said investors should tread cautiously, warning that the repatriation effect may prove "bearish" for risky assets. "We normally sees a switch abroad by the Japanese after the end the fiscal year but it is not happening," he said.

Klaus Baader from Societe Generale the dramatic fall in the yen had been driven by global hedge funds and bank prop-desks rather than "real money" flows of normal investors, increasing the chances that the yen will snap back as the "hot money" crowd close their trades.

The Bank of Japan aims to double the monetary base within two years to pull the country out of deflation. It is buying long-dated bonds for the first time, and will cover 70pc of the budget deficit this year.

One unstated aim is to push insurers and banks into other assets, fueling a stock and property boom that drives recovery through the "wealth effect". A second aim is to push the money abroad to hold down the yen.

The big institutions currently hedge 70pc of the foreign bond holdings on the currency derivatives market. If they reduce their hedge books to the historic norm of 35pc, it could led to a bone-breaking slide in the yen against the dollar, euro, and yuan. Nippon Life Insurance and others have signalled that they might move in this direction. They are not doing so yet.

Neil Mellor from BNY Mellon said the Japanese government is taking a huge risk by opting for de facto monetisation of fiscal deficits. "The worry is that the positive data we've seen so far in Japan starts to dry up. If doubts ever set in, we could see a blow-up of the JGB bond market. They are treading a very fine line," he said.